Must the Macalope do everything?
The Macalope had thought the rather inconsequential business of Apple’s decision to charge for its 802.11n enabler was behind us, but two recent posts — one pro and one con — both manage to get it wrong, so he guesses he’s going to have to weigh in on the issue.
The Seattle Times’ Brier Dudley says:
…Apple said generally accepted accounting principles forced it to charge customers $1.99 for a software upgrade. Accounting standard-setters said that’s untrue.
(The Macalope may address the entirety of Dudley’s bone-headed piece in another post.)
Meanwhile, InfoWorld’s Tom Yager says:
Apple is required to charge you for the enabler. 802.11n was R & D intensive; it’s not your granny’s WiFi. You can’t amortize R & D costs against new products–in this case, AirPort Extreme and Apple TV–and then give that same R & D away somewhere else. That would create what’s called an accounting irregularity, and these aren’t popular at places like Apple and Dell just now. The only way to put 802.11n into existing Mac users’ hands was to turn it into a product against which R & D could be charged.
The Macalope knows what you’re saying to yourself. You’re saying, but, Macalope! Those can’t both be right!
(You do know the Macalope can’t hear you when you talk to your computer, right?)
So, mighty Macalope, was Apple required by GAAP to charge customers for the enabler or not?
(Still can’t hear you!)
No, technically it was not. Dudley’s statement is technically correct while Yager’s is technically incorrect.
But before you picket your local Apple Store, you should hear what Dudley jackassically fails to discuss, which Yager does get into. Because Apple’s decision suddenly makes a lot more sense when you look at what the cost to the company would have been to not charge for the enabler.
After apparently receiving some, ahem, negative feedback on his piece, Dudley defends his statement by indignantly linking to a Wall Street Journal piece and pulling a favorable quote. But he ignores one of the piece’s key grafs:
If Apple had given the enhancement away free, Apple’s auditors could have required it to restate revenue for that period and could possibly have required Apple to start in the future to defer all the revenue from computer sales until all such enhancements are shipped, this person said. That would have had a devastating impact on Apple.
Yes, Apple was technically incorrect in stating that it was “required” by GAAP to charge for the enabler. It could just have easily decided to reopen its books (for the second time in about as many months), taken a charge against prior earnings and potentially affected its future ability to recognize revenue when products ship. That sounds awesome, doesn’t it?
In addition to having a responsibility to its customers, Apple has one to its shareholders, and that option is clearly damaging to shareholders.
Ultimately, however, this whole thing is a rather absurd discussion. Are we really arguing over a $1.99 download? And since when did the Wall Street Journal have a cadre of reporters assigned to covering Apple’s accounting treatments?
Can we be done with it now?